Economic effects of the Treaty of Versailles

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 Summary 
 
  • Germany was in political and economic disarray after the war.

  • The Treaty of Versailles ordered Germany to disband most of its armed forces, leading to high levels of unemployment.

  • Germany had to pay £6,600 million to the Allies; a price many felt was too high a price to pay.

  • Germany lost control of important industrial resources in the Ruhr Valley. 

  • By December 1922, Germany could not meet its commitment to reparations.

During the First World War Germany could not import or export industrial goods, which severely limited trade. Food and other resources were diverted to the war effort.

To pay for the war, rather than raise taxes, the Kaiser borrowed massive amounts of money by selling ‘war bonds’ to the public. By the end of the war the country was heavily in debt.

As a result, by 1919 Germany was no longer the second most economically advanced nation in the world. 

The immediate economic consequences of the terms of the Treaty of Versailles were a significant concern and added to Germany’s humiliation. Under the terms of the treaty Germany had to pay huge sums in reparations. In 1921, this amount was set at £6.6 billion; a sum that Germany could not pay.

By December 1922, because the German government could not pay French and Belgian troops invaded and occupied the Ruhr to take goods and raw materials in lieu of money.